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Market Commentary 08/12/16

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EUR/USD – ECB Conference Puts End To Retracement

This afternoon the ECB announced they were keeping interest rates at records lows. The announcement of the news caused a huge drop to occur on EUR/USD and the market has now fallen back into the daily buy zone which caused the retracement to take place.

When the news came out you can see the market immediately spiked higher. This spike higher would’ve made a large number of traders enter long trades because they would have seen the move higher as being confirmation the market was about to begin a strong move up. A lot of the down movement we are seeing now has been caused by the traders who wet long when the market spiked higher closing their buy trades at a loss. I think today’s announcement and subsequent move lower confirms the downtrend is now going to resume. it’s likely we’ll see the low of the daily buy zone broken within the next couple of weeks so it’s important to watch for entries short.

The two area’s I would concentrate on looking for trades, is the supply zone seen at the top of today’s drop and the breakout zone which has formed as a result of the drop. The supply zone is a good place to look for entries short due to the fact the banks might make the market move back to the highs of the drop to get more of their sell trades placed, but in the event that they don’t I would recommend watching the breakout zone because usually when big drops or rises like this occur, the market will turn before making it back to the high of the drop of low of the move higher so be on the lookout for bearish engulfing candles when the market hits the breakout zone.

USD/JPY – Rising Out Of Demand Zone

The demand zone I expected the market to break in my last post has caused the market to rise today and it’s now looking likely we are going to see the market continue to move up through the supply zone which caused the move down to take place.

From the image you can see the market re-entered the demand zone early this morning. When it hit the zone a small retracement occurred but this came to an end when the London trading session opened. After a couple of hours of the market falling the NY trading session opened and we saw our first sign of bullish movement. The ECB press conference then followed and it was at this point where the market shot back up out of the demand zone.

For entries long I would keep an eye on the demand zone which has caused today’s move higher to take place. I’m not sure if we are going to see the market break through the supply zone or if we are going to see it consolidate between the two zones over the course of tonight or tomorrow, but I think that overall we are going to see the market continue moving higher in the next couple of weeks.

AUD/USD – Large Drop Out Of Sell Zone

AUD/USD is currently in the process of falling out of the sell zone it had just re-entered yesterday evening. With the market now falling, I think it’s likely we are going to see the orange demand zone which caused the last move higher to take place get broken.

You can see the market is actually quite close to hitting the demand zone now. There will probably be a small reaction when the market hits the zone but I think it will come after the market has broken through the low ( marked with a black line ) as that will cause more retail traders to enter short trades which will in turn put more buy orders into the market when the small reaction takes place as most of the traders who went short will close their trades at a loss .

For entries short I’d watch for a move back into the sell zone. The 4 swings down we have seen take place ( marked with X’s ) are a sign the banks have been getting multiple sell trades placed all around the same price so if they have any more sell trades left to place, they’ll place them somewhere around the sell zone.

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